In today’s financialized economies, zero cost money has but one use: It gifts speculators with free COGS (cost of goods sold) on their carry trades. Indeed, today’s 10 basis point cut by the ECB is in itself screaming proof that central bankers are lost in a Keynesian dead-end. You see, Mario, no Frenchman worried about his job is going to buy a new car on credit just because his loan cost drops by a trivial $2 per month, nor will a rounding error improvement in business loan rates cause Italian companies parched for customers to stock up on more inventory or machines. In fact, at the zero bound the only place that today’s microscopic rate cut is meaningful is on the London hedge fund’s spread on German bunds yielding 97 bps—-which are now presumably fundable on repo at 10 bps less.
Poll after poll confirms what we're sure you’ve already been feeling. People are disenchanted with the existing system. They don’t trust the government, they don’t trust the banks, and they don’t trust the media. You can hear the rumblings of grumblings, and it’s only growing louder and louder. It doesn’t have to be this way.
Encouraging and supporting asset bubbles is essentially the only force remaining to keep the system intact as we know it.
A recent Fed paper reports that the Fed's wild money printing orgy has failed to produce much CPI inflation because “consumers are hoarding money”. It is said that this explains why so-called "money velocity" is low. Sadly, they are misinformed: In short, “hoarding” cannot possibly harm the economy. The same, alas and alack, cannot be said of money printing.
Moments ago, in an example of "very serious phrasing", none other than the bank that does god's work on earth (especially when it means providing off balance sheet financing for the bank of the Holy Spirit), just reported that the reason why China will hit its growth target is because of, drumroll, its fudged GDP. Only Goldman is far more serious when it says all of this, with the result being just too hilarious for words: to wit: "In the coming months, China’s National Bureau of Statistics is to make adjustments to the methodology used to calculate GDP. These adjustments are likely to boost real GDP growth by 0.1-0.2pp, thereby making it easier for the government to reach its goal of “around 7.5%” GDP growth in 2014."
The US may be closed on Monday, but after a summer lull that has seen trading volumes plunge to CYNKian lows, activity is set to come back with a bang (if only for the sake of banks' flow desk revenue) with both a key ECB decision due later this week, as well as the August Nonfarm Payrolls print set for Friday. Among the other events, in the US we have the ISM manufacturing on Tuesday, with markets expecting a broadly unchanged reading of 57.0 for August although prices paid are expecting to decline modestly. Then it is ADP on Thursday (a day later than usual) ahead of Payrolls Friday. The Payrolls print is again one of those "most important ever" number since it comes ahead of the the September 16-17 FOMC meeting and on the heels of the moderation of several key data series (retail sales, personal consumption, inflation). Consensus expects a +225K number and this time it is unclear if a big miss will be great news for stocks or finally bad, as 5 years into ZIRP the US economy should be roaring on all cylinders and not sputtering every other month invoking "hopes" of even more central bank intervention.
The sheep have been told their confidence is at a 7 year high by the propaganda peddlers working at the behest of the oligarchy. The sheep are also told that 10 million jobs have been added since the GOTUS played his first round back in 2009. The sheep have been told the record highs in the stock market prove that all is well. If the .1% are doing fantastic, some of the wealth must be trickling down. The sheep are told that QE and ZIRP were really to save Main Street and not the bonuses of Wall Street (at record highs by the way). The sheep are told to fear ISIS, Iran, Assad, Putin, and China. The sheep are told U.S. energy independence is just around the corner and to ignore the fact that gas prices have tripled since in the last ten years. The sheep are told drones will keep them safe and the DHS militarizing the police is just for their safety and security. The sheep are told guns are dangerous in their hands, but not in the hands of the government. The sheep passively eat their iGadgets and barely bleat while being led to the slaughter house.
Earlier this month, Retail Sales missed expectations for the 3rd month in a row, essentially flat on the month. As Doug Short rhetorically asks 'how much insight into the US economy does the nominal retail sales report offer?' With the release of the CPI data, we can judge this in 'real' terms (adjusted for inflation and against the backdrop of our growing population)... and the picture is anything but healthy.
Curious why European bond yields tumble to fresh new lows day after day (with the explicit backstop of the ECB of course, which makes fundamental analysis of sovereign solvency an irrelevant matter)? Then look no further than Italy, where as the chart below shows, not only has the economy "filled the gap" of its economy as tracked by its EU-Harmonized CPI, but at an August print of -0.2%, this is the lowest print in history, worse even than the brief -0.1%, flirt with deflation recorded just in the aftermath of the Lehman crash. But it wasn't only Italy: as Eurostat also reported today, Euroarea inflation also dropped once again, touching 0.3%, down from 0.4% a month ago, the lowest print October 2009.
S&P Futures Surge Over 2000, At Record High, On Collapsing Japanese, European Economic Data, Ukraine EscalationsSubmitted by Tyler Durden on 08/29/2014 06:07 -0500
Following Wednesday's laughable tape painting close where an algo, supposedly that of Citadel under the usual instructions of the NY Fed, ramped futures just over 2,000 to preserve faith in central planning, yesterday everyone was expecting a comparable rigged move... and got it, only this time milliseconds after the close, when futures moved from solidly in the red, to a fresh record high in seconds on no news - although some speculate that Obama not announcing Syrian air strikes yesterday was somehow the bullish catalyst - and purely on another bout of algo buying whose only purpose was to preserve the overnight momentum. Sure enough, this morning we find that even as bond yields around the world continue to probe 2014 lows, and with the Ruble sinking to fresh record lows as the Ukraine situation has deteriorated to unprecedented lows, so US equity futures have once, driven by the now generic USDJPY spike just after the European open, again soared overnight, well above 2000 and are now at all time highs, driven likely by the ongoing deflationary collapse in Europe where August inflation printed 0.3%, the lowest since 2009 while the unemployment remained close to record high, while the Japanese economic abemination is now fully featured for every Keynesian professor to see, with the latest Japanese data basically continuing the pattern of sheer horror as we reported yesterday.
Just when you thought it couldn't get any worse... In a veritable deluge of data from Japan tonight, there is - simply put - no silver lining. First, Japan's jobless rate unexpectedly jumped to 3.8% - its highest since Nov 2013 (despite the highest job-to-applicant ratio in 22 years). Then, household spending re-collapsed 5.9% for the 4th month in a row (showingh no sign of post-tax-hike-recovery). Industrial Production was up next and dramatically missed expectations with a mere 0.2% rebound after last month's plunge (-0.9% YoY - worst in 13 months), quickly followed by a 0.5% drop in Japanes retail trade MoM (missing hope for a 0.3% gain). That's good news, right? Means moar QQE, right? Wrong! Japanese CPI came hot at 3.4% YoY with energy costs and electronic goods 'hyperinflating' at 8.8% and 9.1% respectively. As Goldman's chief Japan economist warns, "the BOJ doesn’t have another bazooka," adding that "The window for reform may already have been half closed." We're gonna need another arrow, Abe!
If you like your de-escalation, you can keep your de-escalation. To think that heading into, and following the Russia-Ukraine "summit" earlier this week there was so much hope that the tense Ukraine civil war "situation" would somehow fix itself. Oh how wrong that thinking was considering overnight, following rebel separatists gains in the southeast of Ukraine which included the strategic port of Novoazvosk and which is "threatening to open up a new front in the war" including setting up a land corridor to Russia controlled-Crimea, Ukraine's president Poroshenko for the first time came out and directly accused Russia of an "Invasion", or at least a first time in recent weeks, saying he has convened the security council on the recent Russian actions.
Key highlights in the coming week: US Durable Goods, Michigan Conf., Services PMI, PCE, and CPI in Euro area and Japan. Broken down by day: Monday - US Services PMI, New Home Sales (Consensus 4.7%); Singapore CPI; Tuesday - US Durable Goods (consensus 7.5%) and Consumer Confidence; Wednesday - Germany GfK Consumer Confidence; Thursday - US GDP 2Q (2nd est., expect 3.70%, below consensus) and Personal Consumption; Euro area Confidence; CPI in Germany and Spain; Friday - US Michigan Conf. (consensus 80.1), PCE (consensus 0.10%), Chicago PMI; Core CPI in Euro area and Japan (consensus 2.30%). Additionally, with a long weekend in the US coming up, expect volumes into the close of the week to slump below even recent near-record lows observed recently as the CYNKing of the S&P 500 goes into overdrive.
Dispassionate overview of the week ahead, with thoughts about September.
Overview of the technical outlook for the major currencies, bonds, Treasuries, stocks, CRB and oil.